Speaking notes for Chris Martin Assistant Deputy Commissioner of Competition

International Affairs Division
Competition Bureau of Canada

Multi-Jurisdictional Developments: Issues of Substance and Process

Multi-Jurisdictional Developments: Issues of Substance and Process
"Seeking Enhanced Cooperation and Soft-Convergence: Recent Developments"

Canadian Bar Association
Annual Fall Conference on Competition Law
Gatineau, Québec

September 23, 2004

(PDF: 44 KB)

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Introduction

Today, more than ever, the Canadian Competition Bureau recognizes the importance of working with foreign counterparts to achieve a fair and competitive marketplace. We need to cooperate with other competition agencies to gain optimal enforcement of our respective national competition laws. Enforcement cooperation and information sharing, where appropriate, are vital tools for many of the cartel investigations and merger reviews conducted by the Bureau. At the same time, with over ninety competition agencies operating today, the pursuit of soft convergence is extremely important and desirable as it provides the business community with a more consistent and predictable global competition framework. Of course, even with increasing soft convergence, there will always remain some cases where one jurisdiction will reach different conclusions than another.

Today, I will talk about recent developments in the area of enforcement cooperation and will highlight some of the good work being done in the pursuit of both soft-convergence and the development of best practices. These efforts are having a very real impact on the global marketplace to the benefit of Canadian consumers and the business community.

Benefits of Bilateral Cooperation

Like many of our counterparts, the Bureau seeks out opportunities to expand international cooperation where it is appropriate and feasible. International enforcement cooperation is a regular part of our thinking and has become increasingly sophisticated over the years.

In the past, one of the main reasons for negotiating cooperation agreements was to address defensive interests, such as potential extraterritorial enforcement. More recently, we see these cooperative frameworks leading to a stronger culture of cooperation among the participating agencies.

These cooperative frameworks help to create a number of synergies, and dialogue with these counterparts provides for the consideration of alternative perspectives, investigative techniques and new approaches to our work. In appropriate cases, cooperation creates a wider and more diverse pool of available information for our investigators that is relevant to the particular matter being examined. Cooperation also helps to increase the efficiency of the merger review process and can help to eliminate the potential shielding effect of national borders for offenders involved in hard-core cartel activities. Although cooperation agreements are by no means a panacea, they do provide a transparent, predictable, and certain framework for cooperation between jurisdictions.

Generally, our agreements require us to notify the other Party about enforcement actions that may affect their jurisdiction's important interests. Under the agreements, Parties recognize that it is desirable to minimize conflicts, and therefore they agree to give careful consideration to each other's interests through all phases of their enforcement activities. The Agreements expressly favour the exchange of information; however, it is important to recognize that under our cooperation agreements, Parties are not required to communicate information when such communication is prohibited by law or is incompatible with important domestic interests.

Canada now has comprehensive cooperation agreements with the United States, the European Union, and Mexico, and is currently in negotiations with Japan. We also have similar inter-agency arrangements with competition authorities in Australia, New Zealand, Chile, and most recently, the United Kingdom. We cooperate with OECD Members pursuant to the 1995 Revised Recommendation of the Council Concerning Co-operation Between Member Countries on Anticompetitive Practices Affecting International Trade ("1995 OECD Cooperation Recommendation"), the updating and enhancing of which will be the subject of discussion next month in Paris.

In addition to our cooperation agreements, we utilize Canada's Mutual Legal Assistance Treaties (MLATs) to seek evidence of criminal activity that may be located in another jurisdiction. MLATs allow the Parties to request assistance in obtaining evidence located in another country through depositions, interviews, searches, and requests for documents. Unlike our cooperation agreements which do not compel Parties to share information, MLATs provide a formal process for compulsory evidence gathering in thirty or so foreign jurisdictions where we have MLATs in place.

In 2002, the Competition Act was amended to permit Canada to enter into mutual legal assistance agreements in non-criminal competition matters. These "Civil MLATs" provide an evidence-gathering framework similar to that provided by our criminal MLATs.

The Bureau communicates with its foreign counterparts regularly and their close cooperation has become a fundamental aspect of our criminal investigations. In the past, cartel enforcement has involved the coordination of timing of formal investigative actions such as searches, subpoenas, interviews, and document production. In certain cartel cases, a notification under our cooperation agreements has led to the initiation of an inquiry in Canada and the coordination of document production orders with another country's use of either search or subpoenas. In such investigations, our officers typically share theories on cases, assist in the location of individuals or companies, identify topics that may be relevant in our jurisdiction that are not being pursued in the other territory, and discuss the timing of investigative steps that follow.

In appropriate merger investigations, Canadian officials maintain regular contacts with foreign authorities and in the past, have shared views on substantive matters such as relevant market definition, entry conditions, and potential remedies. The Bureau recognizes that our contact with international counterparts who are looking at the same transaction has been fundamental in overcoming differences in timing and notification procedures. Close cooperation is particularly beneficial during both the early stages of the review process and the remedy stage. Of course, where multijurisdictional mergers are concerned, we must also acknowledge the invaluable assistance from the merging parties themselves in smoothing the way for cooperation through providing waivers to reviewing agencies.

Our bilateral contacts regularly extend beyond case-related cooperation as we often discuss best approaches to addressing certain types of anticompetitive activity, market definition issues, or investigative techniques. We also exchange information on our approaches to competition policy in trade agreements, on initiatives such as the Free Trade Area of the Americas, and on the examination of trade and competition issues at the World Trade Organization. As part of the framework for the proposed Canada-European Union Trade and Investment Enhancement Agreement announced in March of this year, the two Parties will agree to cooperate on competition policy issues that are of common interest in relevant international fora.

Our officials provide input on initiatives such as guidelines and proposed legislative amendments in foreign jurisdictions. At the same time, we have benefited from receiving advice through consultations with other jurisdictions on proposed changes to our domestic legislation and enforcement guidelines. Next month, we are holding a roundtable with some of our foreign counterparts to discuss their approaches to efficiencies, a topic that has been an ongoing legislative initiative and the subject of much discussion in Canada. Regularly, the Canadian Competition Bureau holds formal bilateral meetings with its closest counterparts where the heads of the competition agencies and senior officials discuss enforcement and policy issues and developments that are of interest to both jurisdictions.

The input and experiences of other jurisdictions on these types of issues significantly benefit the Bureau given our stated goal to have a competition law that reflects the best approaches from around the world.

International Developments: OECD and ICN

Building strong bilateral cooperative links and enhancing our ability to share information and evidence with our closest international partners is essential; the Competition Bureau continues to expand these relationships.

Along with maintaining bilateral relationships, it is also desirable to seek out opportunities for soft-convergence and to discuss best practices and approaches to competition issues on a broader international scale.

In order to make the enforcement process more effective and efficient, we support substantive and procedural soft convergence. We are not talking about the harmonization of competition law, nor do we favour a multilateral agreement that would include a dispute settlement system that could impact the decision-making independence of domestic competition authorities. In fact, this is something that the Competition Bureau and many of our international counterparts have taken a very strong position against in negotiations at the FTAA and in discussions at the OECD and WTO. The approach pursued by the ICN and the OECD Competition Committee has been to encourage soft convergence on general principles and best practices, and at the same time, recognize the need of each individual jurisdiction to be able to adapt these practices to their unique situations when necessary.

Developments at the OECD Competition Committee

The OECD's Competition Committee continues to play a significant role in promoting international cooperation in competition enforcement and establishing best practices, particularly in the areas of cartels and merger review procedures. The Committee meets for a week, three times each year to share experiences and develop mechanisms that can help to enhance members' approaches to competition issues and enforcement. The OECD is a consensus-based organization, and although it is not a full partner in the Committee, the private sector is invited to provide input to Members through the Business and Industry Advisory Committee (BIAC).

The Competition Bureau is extremely active in the work of the Competition Committee and its working parties. During the Committee meetings this past June, Sheridan Scott was confirmed as a member of the Competition Committee's Bureau which oversees the Committee's work and direction.

The Competition Committee provides a forum for roundtable discussions on a wide variety of topics. For example, this October, Committee Members will be discussing Predatory Pricing and Predatory Foreclosure and will also hold a preliminary discussion on Private Enforcement. To determine whether it is time for an update of the 1995 OECD Cooperation Recommendation, the Working Party on Cooperation and Enforcement will begin a stocktaking exercise to hear the experiences of countries with respect to its implementation to date. The Working Party on Competition and Regulation will hold a roundtable on Competition in Health Professions and will discuss experiences with structural separation and the related OECD Recommendation. In February 2005, it will hold a roundtable on Regulatory and Competition issues in the Rail Sector. The OECD publishes reports on the Competition Committee roundtables on its website, www.oecd.org.

The OECD reviews its members' competition regimes periodically and Canada was the subject of an OECD Regulatory Reform review in 2002. This October, a follow-up review of Canada will be undertaken at the Competition Committee. An economic review of Canada was also conducted this year by the Economic and Development Review Committee (EDRC) which contained a special chapter on Product Market Competition in Canada. These peer reviews are aimed at helping governments to reform regulations and practices that raise unnecessary obstacles to competition, innovation, and growth. They are useful because they provide an outside view of the Competition Bureau's performance and provide recommendations on how we can improve our practices. The peer review program is yet another example of how the OECD can promote soft-convergence of best practices.

The results of the work of the OECD are also shared with non-OECD members. In this regard, the OECD's annual Global Forum on Competition provides a dialogue with a significant number of non-OECD members to assist them in advancing their competition policy efforts. To date, the Global Forum has allowed for the peer review of non-OECD members, such as South Africa and Russia. In addition, the competition regimes of Chile and Peru were reviewed at the OECD Latin America Competition Forum last year and this June respectively.

Cartels Work

Recently, the Competition Committee's Working Party on Cooperation and Enforcement has been very active in pursuing the development of Recommended Practices for Formal Information Exchanges in International Cartel Investigations. It is expected that, once completed, these recommended practices will include the following safeguards for formal exchanges of information:

• authority to exchange information;
• provisions to ensure that confidentiality is maintained;
• limitations on use and disclosure;
• consequences in the event of unauthorized disclosure of exchanged information;
• protection of legal profession privilege.

It will also be recommended that Members' relevant laws and procedures concerning information exchanges be made publicly available.

Although OECD Members will be responsible for agreeing to these recommended practices, this project is another good example of where the private sector, through BIAC and other private sector advisors, has provided significant initiative and input into the work of the Competition Committee.

Merger Recommendation

Although the Competition Committee has already developed many important mechanisms that encourage cooperation and soft-convergence, we are enthusiastic about the creation of a new OECD Council Recommendation on Merger Review. This will serve as a significant step for the Committee, and indeed all OECD members, as it works toward adopting many of the Guiding Principles on Merger Notification and Procedures developed by the ICN. The adoption of such a Recommendation by Member states is very important as it demonstrates political "buy-in" of work that has been accomplished by ICN member agencies and NGAs. It is also notable that progress on this Recommendation has been extremely rapid in comparison to the length of time required for the development of previous OECD Recommendations. This underlines the value of the synergies between the ICN and the OECD.

Developments at the ICN

The ICN has been effective in providing an inclusive and open forum to advance competition issues globally. It has benefited from the input of most of the world's competition agencies and from advice and practical experience of the non-governmental community and other international organizations. With a mission of "all competition, all the time" the ICN is a flexible organization that has already accomplished a great deal over the last three years in terms of the sharing of antitrust experience and the development of best practices and approaches. Non-governmental advisors (NGAs) have been integral to the success of our work, having volunteered a tremendous amount of time, effort and expertise to the activities of this virtual organization.

The annual ICN conferences bring together the heads of competition authorities and participating NGAs. During the first three conferences in Italy, Mexico and Korea, much progress was made in terms of the adoption of recommendations and other valuable work product. The Competition Bureau has been a strong supporter and an active participant in the ICN since its inception in 2001. Former Commissioner of Competition, Konrad von Finckenstein, was the first chair of the ICN Steering Group. The current Commissioner is a vice-chair of the Steering Group and several Bureau staff members remain active in the various working groups of this organization as well as on issues of organizational evolution.

The ICN has been successful in developing best practices to which competition agencies worldwide can ascribe, and this is extremely important for pro-competition efforts in both developing and developed jurisdictions. For countries that are currently building competition regimes, technical assistance will always be an essential need, but having a sound and certain standard to aspire to at the outset is extremely important and the ICN is helping to build such standards. The ICN's work has been of great value not only to jurisdictions that have recently established systems and agencies but also to jurisdictions that already have mature systems and are reviewing or revising their laws and practices.

During the first years, the ICN has pursued its work through Working Groups on: Mergers; Advocacy; Capacity Building and Competition Policy Implementation; and Antitrust Enforcement in Regulated Sectors. In addition, during the April 2004 Annual Conference in Seoul, the ICN created a new working group on Cartels. A number of you have been actively involved in this work.

Today, I would like to focus on the results that the ICN has accomplished in the area of Merger Notification and Procedures and then discuss what might be expected as we go forward in the area of cartels.

Merger Notification and Procedures

It is in the area of merger review that the benefit of soft-convergence has been most obvious. The ICN Merger Working Group's subgroup on Merger Notification and Procedures has been one of the most active and successful components of the ICN to date under the leadership of Randy Tritell of the US Federal Trade Commission. It seeks to improve procedural aspects of international merger review such as diverse notification thresholds, schedules, and waiting periods. The CBA has contributed to this work.

Thanks to the outstanding work of the Notifications and Procedures Subgroup, the ICN has adopted eight Guiding Principles for Merger Notification Review (see Box 1 below). In addition, the ICN has now established eleven Recommended Practices in this area – benchmarks to which ICN member agencies can aspire. The Recommended Practices address the following areas:

1. Nexus to Reviewing Jurisdiction
2. Notification Thresholds
3. Timing of Notifications
4. Review Periods
5. Requirements for Initial Notification
6. Transparency
7. Review of Merger Control Provisions
8. Conduct of Merger Investigations
9. Procedural Fairness
10. Confidentiality
11. Interagency Coordination

Although I will not discuss each of these Recommended Practices in detail, I do encourage you to visit the ICN website at www.InternationalCompetiti onNetwork.org for more information and related discussion.

A number of jurisdictions have looked to the Recommended Practices to improve their merger review procedures. The ICN does not assess members on how well they meet the recommended practices; however, during the last ICN conference, we did learn the extent to which the ICN Recommended Practices have played a role in improving various jurisdictions' merger review processes. Some examples include the following:

• Korea has adopted a local nexus requirement where both parties to a transaction must meet a sales threshold in the Korean market;
• Romania has abolished its market share threshold;
• The EC has abolished its filing deadline
• Mexico has reduced the time for review of transactions that do not raise material competitive concerns;
• Ireland has revised the review process to encourage early meetings with parties;
• The United States has taken steps to increase the transparency of its decisions not to challenge mergers that entail second stage investigations by issuing explanatory statements of their analysis in selected cases.

BOX 1: Guiding Principles For Merger Notification and Review Sovereignty. Jurisdictions are sovereign with respect to the application of their own laws to mergers. Transparency. In order to foster consistency, predictability, and fairness, the merger review process should be transparent with respect to the policies, practices, and procedures involved in the review, the identity of the decision-maker(s), the substantive standard of review, and the bases of any adverse enforcement decisions on the merits. Non-discrimination on the basis of nationality. In the merger review process, jurisdictions should not discriminate in the application of competition laws and regulations on the basis of nationality. Procedural fairness. Prior to a final adverse decision on the merits, merging parties should be informed of the competitive concerns that form the basis for the proposed adverse decision and the factual basis upon which such concerns are based, and should have an opportunity to express their views in relation to those concerns. Reviewing jurisdictions should provide an opportunity for review of such decisions before a separate adjudicative body. Third parties that believe they would be harmed by potential anticompetitive effects of a proposed transaction should be allowed to express their views in the course of the merger review process. Efficient, timely, and effective review. The merger review process should provide enforcement agencies with information needed to review the competitive effects of transactions and should not impose unnecessary costs on transactions. The review of transactions should be conducted, and any resulting enforcement decision should be made, within a reasonable and determinable time frame. Coordination. Jurisdictions reviewing the same transaction should engage in such coordination as would, without compromising enforcement of domestic laws, enhance the efficiency and effectiveness of the review process and reduce transaction costs. Convergence. Jurisdictions should seek convergence of merger review processes toward agreed best practices. Protection of confidential information. The merger review process should provide for the protection of confidential information.

In Fall 2005, a workshop is planned that will include a study on the experiences and challenges faced by member jurisdictions concerning implementation of the ICN Guiding Principles and Recommended Practices.

ICN work in the area of merger notifications and procedures will continue. The Merger Notification and Procedures Subgroup is working to develop new Recommended Practices on merger remedies, which will involve coordination with the Analytical Framework Subgroup on the substantive aspects of merger remedies and on enforcement powers. The subgroup is also expected to seek the developments of model confidentiality waivers and a comparative study of merger filing fees.

An interesting debate has recently arisen in the Merger Notification and Procedures Subgroup. Over the past few ICN conferences, there has been some discussion about carrying forward the work of this subgroup to merging parties. The argument is that since all of the current Recommended Practices to date have focused on what agencies should do to improve the merger review process, merging parties and their counsel should also be given encouragement to help in the improvement of this process. At this time, some members wish to establish "Recommended Practices for Merging Parties" (RPMP). However, there has been no consensus within the subgroup to go ahead with this proposal and various NGAs have raised concern about it.

This issue has been hotly debated within the subgroup over the past few months and there is a divide on whether there is a need for such a recommendation. Some NGAs question whether binding requirements would be placed on merging parties and their counsel. This debate still needs to be resolved but it is the Bureau's position that merging parties can contribute positively to make the merger review process more timely, efficient, and effective. However, it may be too strong to establish a set of recommended practices for merging parties, but instead, general guidelines or factors could be used to help facilitate the merger review process. The general message that such a document should convey is that there are ways that agencies and merging parties can work together to decrease costs and burdens and to achieve better response times. We also believe that these guidelines/factors would not impose any form of obligation on merging parties and we would not criticize parties for not adopting or following them. This is consistent with the soft-convergence approach used throughout the ICN.

Cartels Working Group

In the first three years, much of the ICN's focus has been in the area of merger review, but at the last annual conference, a cartel work program was approved. This new ICN multi-year cartel program is very ambitious, and two cartel subgroups have been created.

Cartel Subgroup I - General Framework

Subgroup I will seek to define the scope of hard-core cartel conduct that ICN members agree should be penalized. It is expected that a document will be created that presents the various established definitions used for hard-core cartels as well as the subgroup's own consensus definition.

The subgroup will also seek to identify common elements of effective cartel enforcement regimes. This would involve the evaluation of the types of organizations and organizational structures best suited to the investigation, detection, prosecution and penalization of cartel conduct. The subgroup will also review experiences in various jurisdictions, consolidate and analyze prior work on effective penalties against cartel conduct, and discuss ways that conduct identified in the cartel definition can be punished. Comparison papers that present and explore these topics, specifically incorporating different models or aspects from various jurisdictions, are expected to be presented at the 2005 annual conference in Bonn. The subgroup will consider identifying the common elements of effective anti-cartel frameworks to create guiding principles. The substantial amount of work already done by the OECD's Competition Committee in the field of hard-core cartels will no doubt serve as a significant starting point for ICN work in this area.

Cartel Subgroup II – Anti-Cartel Enforcement

Subgroup II, which is currently co-chaired by the Competition Bureau and the Australian Competition and Consumer Commission, aims to enhance the effectiveness of anti-cartel enforcement by identifying and sharing specific investigative techniques among agencies with differing levels of experience. Subgroup II provides a forum where all cartel enforcers will have opportunities to share experiences, learn from one another, and explore ways to promote and deepen cooperation and coordination in international cartel enforcement matters.

One of Subgroup II's primary responsibilities is to oversee the annual Cartel Workshop, which since 1999 has been organized by cartel enforcers on an ad hoc basis. This workshop has now been brought under the ICN umbrella and Subgroup II is playing a key role in shaping the agenda for the 2004 ICN Cartels Workshop to be held this November in Sydney, Australia. The subgroup is also identifying standard items and themes for future workshops.

In addition to the workshop, Subgroup II will develop a manual for anti-cartel enforcement that will include recommended approaches to all areas of anti-cartel enforcement, such as evidence gathering tools and techniques, leniency, cooperation, case management, penalties, experts and evidence handling. This year, the Competition Bureau is taking the lead on drafting a chapter on searches, raids, and inspections. This chapter will take into account the experiences of all cartel enforcers, and it will be a practical resource for enforcers contemplating such tools.

Subgroup II will also hold a practical and comprehensive workshop on leniency programs that will immediately follow the Cartels Workshop in Sydney. The Leniency Workshop will address fundamental issues concerning the development and implementation of effective leniency programs and will be aimed both at jurisdictions with leniency programs and those considering adopting such programs. This workshop will include the participation of a limited number of NGAs in various panel discussions and role-play demonstrations. The US Department of Justice Antitrust Division has spearheaded this initiative.

The materials from the Leniency Workshop will be compiled into a "Notebook" of practical advice pertaining to the development and the implementation of a leniency program. A videotape of the public portions of the Leniency Workshop will also be produced, and a synthesis of the key issues and practices raised in the Workshop will be incorporated into the anti-cartel manual. This program will serve as a research tool for both new and experienced competition authorities.

Finally, Subgroup II is working towards creating a database of key information about ICN Members' anti-cartel programs along with the contact information and Web links to each Members' cartel information to be published on the ICN website. This will be similar to the links to merger-related materials such as legislation, regulations, and guidelines established by the Notification and Procedures Subgroup.

Conclusion

To close, I would like to reiterate the Canadian Competition Bureau's commitment to further strengthen its ability to cooperate with enforcement counterparts around the world on both a policy and a practical level. This will promote more effective and efficient approaches to the Bureau's various enforcement responsibilities such as merger review and cartel enforcement.

We will also continue to support the strengthening of competition regimes globally by contributing to and benefiting from the work of the OECD, ICN and other organizations where best practices and approaches are discussed and where convergence is achieved.

Thank you for giving me the opportunity to participate on this panel today.